Tax Blog/Blawg

In the last two weeks, various news sources have reported on a previously low-profile IRS initiative to use state land-transfer records to identify potential omissions in reporting gifts of real estate.  (Via TaxProf here and the WSJ here.)  According to the reports, the IRS is using information received from at least 16 states to identify transfers of real estate the value of which exceeded the $13,000 threshold for filing a gift tax return.  As a result, the IRS is pursuing taxpayers who made such transfers but failed to file returns.

Although this particular example of the IRS building an enforcement case through the use of non-tax sources targets individuals, corporate tax professionals should not rest too easily.  Most corporate taxpayers might not be engaged in such outright noncompliance as failing to file returns.  Nevertheless, the volume of non-tax information that is available in the public domain - especially for large, public companies - poses  potentially analogous risks to corporate taxpayers  for the positions taken on their tax returns. Beyond the traditional sources of non-tax information, such as SEC filings and court documents, news articles and press releases proliferate over the Internet.  Likewise, companies may face a new potential source of trouble in the proliferation of social networking sites.  From LinkedIn resumes to Facebook profiles, information that reflects upon a company grows by the day.

As part of its current Offshore Voluntary Disclosure Initiative (“OVDI”), the IRS is strongly encouraging taxpayers against making so-called “quiet” disclosures, in which taxpayers file amended tax returns, pay the applicable taxes and interest, and hope that the IRS doesn’t identify them for further investigation.  These disclosures are described as quiet because they involve neither alerting the IRS to the amended returns nor offering to pay any applicable penalties.  Because taxpayers may rightfully perceive the 25-percent penalty required to participate in ...

Last week, the United States Department of Justice asked a federal court in San Francisco to force HSBC India to disclose the names of U.S. customers whom the Justice Department suspects are evading U.S. tax laws.  According to the Justice Department’s brief, HSBC India solicited U.S. residents of Indian origin to open bank accounts.  HSBC apparently advised those individuals that the bank would not disclose the existence of the accounts, or any interest earned on those accounts, to the U.S. government.

Meanwhile, two individuals recently pled guilty to tax evasion in connection ...

Much confusion has existed over the past few years about filing Form TD F 90-22.1 ("FBAR") to report foreign accounts to the IRS.  To remedy this, the IRS issued pronouncements in 2009 and 2010 granting certain FBAR filing exemptions and penalty waivers.  Many of these benefits had retroactive effect.  A recent criminal case, United States v. Simon, calls into question the validity of the IRS pronouncements.  By holding that the U.S. Department of Justice may pursue criminal prosecutions in situations where the IRS publicly indicated that it would not even assert civil penalties, this ...

TaxBlawg’s Guest Commentator, David L. Bernard, is the former Vice President of Taxes for Kimberly-Clark Corporation, a past president of the Tax Executives Institute, and a periodic contributor to TaxBlawg.

Transfer pricing among affiliated companies is the classic “double-edged sword”. When carefully designed, transfer pricing practices can cut a company’s effective tax rate (“ETR”) with little risk of interference from tax authorities. When done poorly, transfer pricing can devolve into a mess of  ETR-killing practices.  As quickly as one edge can save a company money, the other edge can cut short a tax professional’s career.

On Friday, the Treasury Department issued final regulations under Code section 1001 relating to the modification of debt instruments.  In relevant part, the regulation provides that, following the modification of a debt instrument, the classification of the modified instrument as debt or equity for federal income tax purposes does not take into account any deterioration in the financial condition of the obligor.  Treas. Reg. § 1.1001-3(f)(7)(ii)(A).

The only public comment on the proposed regulations noted that the existing regulation does not contain rules for determining ...

From time to time, we receive questions from readers about current topics on their minds.  One of our readers wrote earlier this week to ask about an article from Monday’s Tax Notes – 2011 Brings New Return Obligation for Corporate Actions Affecting Basis, by Amy Elliott.  The article discussed the newly effective Code section 6045B which generally requires corporations that engage in some act that affects the basis of their outstanding stock or other securities (e.g., a stock split or a distribution in excess of earnings and profits) to file a statement with the IRS and furnish a ...

• Business Spectator: Stalled R&D legislation stunts innovation (Australia).  As we discussed previously, temporary legislation makes for lousy tax policy, a problem that Australia seems to be experiencing right now.

• Forbes - Business in the Beltway: Taxes? Hold ‘Em!.  It seems that the pending deal on individual taxes will include a one-year extension of the R&D tax credit here in the U.S.

• BusinessWeek: German FinMin Defends Need for Euro.  Not technically about tax, but a breakup of the Euro could have significant, if temporary, implications for U.S. taxpayers.  Then again, Europe ...

Recalling one of our first blawg posts, the topic of tax reform could be described in much the same terms as the codification of economic substance (prior to its codification, anyway): "a cousin of Bigfoot and the Loch Ness Monster – often spotted, but never confirmed."  Reform commissions come and go with nearly every presidential administration, and the current one is no exception.

The National Commission on Fiscal Responsibility and Reform has released its much-anticipated report proposing reforms intended to closing the yawning federal budget deficit.  The report, titled "The Moment of Truth," makes a variety of proposals, including a number of reforms to individual and corporate tax provisions.

One of our readers recently emailed us with a question about the application of the new Schedule UTP to deferred tax assets.  The question is straightforward enough: must uncertain positions involving deferred tax assets be reported on Schedule UTP and, if so, when must they be reported?  The explanation, thanks to confusion created by several examples in the final Schedule UTP instructions, is anything but straightforward.  Let’s start with a little background.